Question

The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 9,400 direct labor-hours will be required in February. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $127,840 per month, which includes depreciation of $18,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for February should be: Multiple Choice $19.90 per direct labor-hour $22.20 per direct labor-hour $13.60 per direct labor-hour $8.60 per direct labor-hour

Answer 1

Predetermined manufacturing overhead rate= $22.2 per direct labor hour

Step-by-step explanation:

Giving the following information:

Fixed manufacturing overhead= $127,840 per month

Estimated direct labor hours= 9,400

The variable overhead rate is $8.60 per direct labor hour

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (127,840 / 9,400) + 8.6

Predetermined manufacturing overhead rate= $22.2 per direct labor hour